MTN Group: An Interesting Way To Gain Exposure To Africa
May. 5, 2015 11:42 AM ET | 4 comments | About: MTN Group Ltd. ADR (MTNOY)
Summary
•The stock is still recovering from an unjustified correction.
•User base keeps growing rapidly in many markets.
•The opportunity to get exposure to African markets through a large profitable company with room to grow.
I came across MTN Group Ltd. (OTCPK:MTNOY) during a stock pitch competition I took part in and won earlier this year. I decided to share my analysis of the security with you today. The stock has recovered slightly from the selloff it saw in the last few months, but I believe there's more growth ahead. I will take a quick look at the company, the industry, macro elements, as well as a fundamental outlook of the company.
Company Overview
MTN Group is a telecommunications leader in emerging markets and is based in Johannesburg, operating in more than 22 countries across Africa and the Middle East. At the end of the first quarter, they had more than 227 million subscribers. Their operations spread out across five segments:
•Revenue from voice subscriptions, which contributed to 61.2% of revenue in 2014.
•Revenue from data, which contributed 18.7% of revenue in 2014. This segment increased 22.8% year over year and is an interesting growth vector for the company.
•Financial services, through mobile money, which is growing at a fast rate. The amount of users increased 50% in 2014 to attain 22 million users. Unlike in North America, mobile money is a thriving business in Africa. Consumers use their phones to pay for everyday goods and services rather than relying on checks, cash or banks.
•Digital services, which will allow for many synergies with the core business through an interest in two major internet provider companies in Africa and the Middle East.
•In IT, MTN is becoming the provider of choice in Africa for companies of all sizes with 47 data centers throughout the continent.
Geographical segmentation
MTN Group is divided into four operating companies to which I have added MTN Irancell's revenue. This seemed appropriate considering MTN group owns 49% of the operation.
•MTN South Africa contributed 38.92 billion rand ($3.23 billion) to the group's revenues in 2014 (28 million subscribers).
•MTN Nigeria contributed 54 billion rand ($4.48 billion) to the group in 2014 (59.9 million subscribers).
•MTN large cluster Opco, composed of Ghana, Cameroon, Uganda, Syria, Sudan and Ivory Coast, contributed 31.2 billion rand ($2.59 billion) to the group's revenue in 2014.
•MTN small cluster Opco, which focuses on frontier markets such as Afghanistan, Yemen, Botswana, Zambia, Congo, Rwanda, etc., contributed 22.39 billion rand ($1.85 billion) to the group's revenue in 2014.
•Finally, MTN IranCell contributed 11.63 billion rand ($966 million) which don't show up on the balance sheet because of GAAP (44 million subscribers).
• Threat of new entrants: It goes without saying that in an industry, which needs as much capital as the telecommunication industry, the first fence for new entrants is access to capital. Thus, new competitors emerge when financing is abundant. Also, the intense regulation surrounding the industry also is an undeniable hurdle for a new firm. MTN Group has had the privilege of a first mover advantage in many unstable markets often perceived as too risky. The group is the No. 1 cell phone operator in Nigeria, Ghana, Uganda, Cameroon, Ivory Coast, Congo and in several other countries. However, the arrival of new competitors in several of these markets has forced MTN to reduce its margins and to restructure operations in certain countries as we have seen with the arrival of Vodacom Group Ltd. (OTC:VODAF) in South Africa a few years ago.
• Threat of substitutes: The coming alternatives to traditional mobile phones is a menace to the voice segment, which makes up most of MTN Group's revenues. Applications such as Viber do however necessitate a trustworthy internet connection. This sets up MTN to recoup the potential losses in voice revenue through its data plans as well as its interest in internet companies. The company owns 33% of Africa Internet Holdings and 50% of Middle East Internet Holdings.
Among its comparables Vodacom Group Ltd. and Telkom SA SOC (OTCPK:TLKGY) seem to be the most obvious choices considering they are the local competitors of MTN Group.
http://seekingalpha.com/article/3140906-mtn-g...rica?ifp=0
.....................................................................................
......as MTN " is the world's 15th-largest mobile telecommunications company measured by subscribers as of 31 March 2014", (http://en.wikipedia.org/wiki/MTN_Group)
I don't see them as being part of the DUTV Group, jmo I did find the article of interest in helping w/perspective and whom was competitive.
May. 5, 2015 11:42 AM ET | 4 comments | About: MTN Group Ltd. ADR (MTNOY)
Summary
•The stock is still recovering from an unjustified correction.
•User base keeps growing rapidly in many markets.
•The opportunity to get exposure to African markets through a large profitable company with room to grow.
I came across MTN Group Ltd. (OTCPK:MTNOY) during a stock pitch competition I took part in and won earlier this year. I decided to share my analysis of the security with you today. The stock has recovered slightly from the selloff it saw in the last few months, but I believe there's more growth ahead. I will take a quick look at the company, the industry, macro elements, as well as a fundamental outlook of the company.
Company Overview
MTN Group is a telecommunications leader in emerging markets and is based in Johannesburg, operating in more than 22 countries across Africa and the Middle East. At the end of the first quarter, they had more than 227 million subscribers. Their operations spread out across five segments:
•Revenue from voice subscriptions, which contributed to 61.2% of revenue in 2014.
•Revenue from data, which contributed 18.7% of revenue in 2014. This segment increased 22.8% year over year and is an interesting growth vector for the company.
•Financial services, through mobile money, which is growing at a fast rate. The amount of users increased 50% in 2014 to attain 22 million users. Unlike in North America, mobile money is a thriving business in Africa. Consumers use their phones to pay for everyday goods and services rather than relying on checks, cash or banks.
•Digital services, which will allow for many synergies with the core business through an interest in two major internet provider companies in Africa and the Middle East.
•In IT, MTN is becoming the provider of choice in Africa for companies of all sizes with 47 data centers throughout the continent.
Geographical segmentation
MTN Group is divided into four operating companies to which I have added MTN Irancell's revenue. This seemed appropriate considering MTN group owns 49% of the operation.
•MTN South Africa contributed 38.92 billion rand ($3.23 billion) to the group's revenues in 2014 (28 million subscribers).
•MTN Nigeria contributed 54 billion rand ($4.48 billion) to the group in 2014 (59.9 million subscribers).
•MTN large cluster Opco, composed of Ghana, Cameroon, Uganda, Syria, Sudan and Ivory Coast, contributed 31.2 billion rand ($2.59 billion) to the group's revenue in 2014.
•MTN small cluster Opco, which focuses on frontier markets such as Afghanistan, Yemen, Botswana, Zambia, Congo, Rwanda, etc., contributed 22.39 billion rand ($1.85 billion) to the group's revenue in 2014.
•Finally, MTN IranCell contributed 11.63 billion rand ($966 million) which don't show up on the balance sheet because of GAAP (44 million subscribers).
• Threat of new entrants: It goes without saying that in an industry, which needs as much capital as the telecommunication industry, the first fence for new entrants is access to capital. Thus, new competitors emerge when financing is abundant. Also, the intense regulation surrounding the industry also is an undeniable hurdle for a new firm. MTN Group has had the privilege of a first mover advantage in many unstable markets often perceived as too risky. The group is the No. 1 cell phone operator in Nigeria, Ghana, Uganda, Cameroon, Ivory Coast, Congo and in several other countries. However, the arrival of new competitors in several of these markets has forced MTN to reduce its margins and to restructure operations in certain countries as we have seen with the arrival of Vodacom Group Ltd. (OTC:VODAF) in South Africa a few years ago.
• Threat of substitutes: The coming alternatives to traditional mobile phones is a menace to the voice segment, which makes up most of MTN Group's revenues. Applications such as Viber do however necessitate a trustworthy internet connection. This sets up MTN to recoup the potential losses in voice revenue through its data plans as well as its interest in internet companies. The company owns 33% of Africa Internet Holdings and 50% of Middle East Internet Holdings.
Among its comparables Vodacom Group Ltd. and Telkom SA SOC (OTCPK:TLKGY) seem to be the most obvious choices considering they are the local competitors of MTN Group.
http://seekingalpha.com/article/3140906-mtn-g...rica?ifp=0
.....................................................................................
......as MTN " is the world's 15th-largest mobile telecommunications company measured by subscribers as of 31 March 2014", (http://en.wikipedia.org/wiki/MTN_Group)
I don't see them as being part of the DUTV Group, jmo I did find the article of interest in helping w/perspective and whom was competitive.
